HIGHWAY INFORMATION UPDATE

Estimation of Highway Trust Fund Tax Receipts Attributable to Highway Users in Each State

The Federal Highway Trust Fund (HTF) was established effective July 1, 1956 to receive the proceeds of Federal highway-user taxes and to serve as the source of funds for the Federal-aid highway program. Beginning April 1, 1983, the Mass Transit Account was established within the HTF to fund Mass Transit activities.

Funds for the principal Federal-aid highway programs--the National Highway System, Interstate, the Surface Transportation Program, the I-highway Bridge Replacement and Rehabilitation Program, Interstate Maintenance, Congestion Mitigation and Air Quality Improvement Program, Highway Safety, and Planning--are apportioned among the States using formulas or percentages found in Title 23, United States Code. These formulas use a variety of factors including lane-miles, vehicle-miles of travel, and the percent share of funds from certain Federal-aid programs in the years 1987-1991. These formulas are intended to distribute funds so as to support the national interest in surface transportation. Generally, these apportionments are made without regard to the source of the funds and result in some States receiving less than the highway users in the State contributed while other States receive more. That is, some States are "donors" and some are "donees."

The Federal Highway Administration's Office of Highway Information Management prepares Comparison of Federal Highway Trust Fund Receipts Attributable to the States and Federal-aid Apportionments and Allocations from the Fund (table FE-221). This table measures the extent to which States are donors or donees by comparing each State's contributions to the Highway Account of the Trust Fund to the apportionments and allocations it receives from the Highway Account. This discussion is focused on the Highway Account of the Trust Fund which primarily funds the programs of FHWA and portions of the National Highway Traffic Safety Administration's program. This type of approach could be applied to the Mass Transit Account, which funds some of the Federal Transit Administration's programs, or other user-fee financed programs. General revenues are used to fund Federal aid for many transportation programs, including rail and water transportation.

The apportionments and allocations to each State from the Fund are easily obtained from the records of the U.S. Department of Transportation (DOT). It is a surprise to many that the contributions to the Fund are not similarly available from the Internal Revenue Service (IRS). The fuel taxes, which make up over 80 percent of the Fund's receipts, are imposed when the fuel is first removed from bulk storage and the tax is paid by the seller. Thus, the typical Federal fuel taxpayer is an oil company. If Trust Fund contributions were determined using the information on the tax returns, over half of the gasoline tax receipts would be credited to just three States--Texas, New York, and Pennsylvania--where major oil companies have their headquarters. The truck tire tax receipts are concentrated in Ohio, the home of the U.S. tire industry, and the tax on truck and trailer chassis is paid by the seller. Naturally, the costs of these taxes become part of the purchase price of the products and are ultimately paid by the highway user. The heavy vehicle use tax is the only Federal highway-user tax paid directly to the IRS by the vehicle owner, and even then the return captures only the business address of the owner, not the State or States where the vehicle is operated.

As tax records do not yield the desired information, the FHWA estimates the Trust Fund contributions from highway users in each State. The method for attributing Trust Fund receipts to each State has changed over time. When FHWA first started making the estimates, it was in response to general interest in donor-donee issues. With the passage of the Surface Transportation Assistance Act of 1982, the attribution of Trust Fund receipts became a factor in calculating the 8.5-percent minimum allocation. FHWA solicited comments from the States on its methodology and modified it to reflect the concerns of the States and the Congress that the attribution employ use-based factors. The resulting methodology, first used to attribute fiscal year 1984 Trust Fund receipts, was published in the Federal Register on June 21, 1985. These procedures, summarized below, have been in use since that time.

The Department of the Treasury reports the tax receipts deposited in the Trust Fund for each tax type. The net receipts, after refunds and transfers, are the contributions to the Trust Fund that are attributed to the highway users in each State. These U.S. totals are prorated among the States based on the factors shown in table 1. The basic premise is that the Federal gasoline tax receipts to the Highway Account are received from each State in proportion to the highway use of gasoline in each State compared to the total use in all States. Simply put, if Alabama used 2 percent of all highway gasoline in the U.S., then 2 percent of the Federal gasoline tax deposited in the Trust Fund is assumed to come from highway users in Alabama. This same principle is applied to each type of fuel. The truck taxes--the truck and trailer chassis sales tax, the truck tire tax, and the heavy vehicle use tax--are attributed to the States using highway use of diesel and special fuels. This is considered to be the best available proxy for truck use in each State. Table 2 shows an example of the calculation for a single State to further illustrate the concept.

Table 1Factors for Attributing Highway Trust Fund Receipts to Highway Users in Each State

Tax

Attribution Factor1

Gasoline

Ratio of highway use of gasoline (excluding gasohol) in each State to highway use of gasoline in all States.

Gasohol

Ratio of highway use of gasohol in each State tohighway use of gasohol in all States.

Diesel and Special Fuels

Ratio of highway use of diesel and special fuels in each State to highway use of diesel and special fuels in all States.

Truck and Trailer SalesTruck TiresHeavy Vehicle Use

Ratio of highway use of diesel and special fuels in each State to highway use of diesel and special fuels in all States.

1Highway use of gasoline is derived by the FHWA from reports from State fuel tax agencies. The FHWA estimates gasohol using State-supplied data, along with information from the Internal Revenue Service, the Department of Energy, and the ethanol industry. Beginning January 1, 1993, Federal law defines three types of gasohol each with a different tax rate--IO-percent gasohol (the traditional 10-percent fuel alcohol, 90-percent gasoline blend), 7.7-percent gasohol and 5.7-percent gasohol. The volumes of each are estimated and weighted based on their tax contributions to give a 10-percent equivalent volume. Highway use of diesel and special fuels is reported by the States from the records of their fuel tax agencies. The diesel and special fuels volume reflects the adjustments made to reflect use in the State rather than purchases in the State.

Table 2Sample of Attribution of Trust Fund Receipts for Alabama

Tax Type

1995 U.S. Total Highway Account Tax Receipts ($000)

1994 Highway Fuel Use 1(Thousands of Gallons)

Attributed Receipts ($000)

U.S. Total

Alabama

Percent of U.S.Total

Gasoline

12,061,817

103,998,018

2,076,594

1,997

240,846

Gasohol2

491,555

12,128,115

143,850

1,186

5,830

Diesel and Special Fuels

4,779,918

25,098,520

659,025

2,626

125,509

Truck and Trailer Sales3

2,008,840

25,098,520

659,025

2,626

52,747

Truck Tires3

395,443

25,098,520

659,025

2,626

10,383

Heavy Vehicle Use3

681,792

25,098,520

659,025

2,626

17,902

Total

20,419,364

140,106,132

2,879,469

-

453,217

1The fuel use data used for attribution is the latest verified data available, which generally means that there is a 1-year lag between the Trust Fund receipts and the fuel use data used to attribute them.2The gasohol volume shown is the 10-percent equivalent of the three different types of gasohol defined in Federal law.3The fuel volume shown is for diesel and special fuels.

The attribution process is part of the calculation of three of the equity adjustment provisions of the Intermodal Surface Transportation Efficiency Act of 1991--the 90-percent minimum allocation, the 90 percent of payments adjustment, and the donor state bonus. For fiscal year 1997, the attribution of fiscal year 1995 Highway Account receipts will be used to compute the 90-percent minimum allocation and the 90-percent of payments adjustment. Attribution of projected fiscal year 1997 combined Highway and Mass Transit Account receipts will be used to compute the donor state bonus.

The Office of Highway Information Management publishes a number of tables on this and related topics in its annual Highway Statistics. Included are Federal-aid apportionment formulas (table FA-4A), apportionments (table FA-4), allocations (table FA-4D), the attribution of Highway Trust Fund receipts (table FE-9), the fuel volumes used in the attribution process (table MF-27) and a comparison of attributed highway account receipts to apportionments and allocations (tableFE-221). Questions on these topics may be directed to Carolyn Edwards at 202-366-5022.